Group says reducing CLL will harm housing market, limit middle class access to affordable mortgages
WASHINGTON – March 24, 2014 – (RealEstateRama) — Congresswoman Carolyn B. Maloney (NY-12) today responded to the Federal Housing Finance Agency’s request for public input on a proposal to reduce conforming loan limits, the maximum size of a home mortgage that Fannie Mae and Freddie Mac can purchase, with a letter signed by a bipartisan coalition of 35 House members who oppose the change. Maloney, the top Democrat on the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, has been highly critical of the FHFA proposal that could result in reduced access to mortgages for middle-class families in high-cost real estate markets like New York City.
The House members argue that FHFA lacks the authority to unilaterally alter conforming loan limits and that a reduction at this time would severely harm the housing market and middle-class families looking to purchase a home. “We urge you to continue to defer to the United States Congress on whether the conforming loan limits should be reduced and allow our delicate recovery in housing to continue,” the House members wrote in their letter to FHFA Director Mel Watt.
“Reducing conforming loan limits now or in the near future could hurt middle class families who are struggling to qualify for federally-backed mortgages in high cost real estate markets,” said Maloney. FHFA’s proposal to reduce conforming loan limits would cut thousands of families out of the housing market by forcing them to seek private mortgages, which typically require credit scores above 760 and average down payments of nearly 34 percent, Maloney argues.
Last year, Maloney and 66 of her colleagues sent a similar letter to FHFA’s Acting Director Ed DeMarco challenging his economic rationale and the agency’s legal authority to reduce conforming loan limits. The agency responded by announcing that the statutory loan limits would be maintained for 2014, and found that higher limits were appropriate in an additional 18 high cost counties across the country. In December, the agency issued a request for public input on the proposal.
The recently released housing finance reform proposal from Senate Banking Committee Chairman Tim Johnson and Ranking Member Mike Crapo included a provision that would bar FHFA from unilaterally changing conforming loan limits.
The current conforming loan limit is set at $417,000 in the continental United States and $625,000 in high-cost areas like the New York metropolitan area. The proposal would reduce limits to $400,000 and $600,000 respectively.
Maloney’s letter to Watt is below. It is signed by Reps. Gary C. Miller (CA-31), Brad Sherman (CA-30), Peter T. King (NY-01), Michael E. Capuano (MA-07), Jim Costa (CA-16), Bradley S. Schneider (IL-10), Ken Calvert (CA-42), Joyce Beatty (OH-03), Eleanor Norton Holmes (DC), Michael G. Grimm (NY-11), Gerald E. Connolly (VA-11), Niki Tsongas (MA-03), Charles B. Rangel (NY-13), Anna G. Eshoo (CA-18), Mike Thompson (CA-05), James P. McGovern (MA-02), Xavier Becerra (CA-34), Carolyn McCarthy (NY-04), Jared Huffman (CA-02), Janice Hahn (CA-44), George Miller (CA-11), Sam Farr (CA-20), Gwen Moore (WI-04), Lucille Roybal-Allard (CA-40), Jerrold Nadler (NY-10), Mike Quigley (IL-05), Adam B. Schiff (CA-28), Tony Cárdenas (CA-29), Patrick E. Murphy (Fl-18), Michael M. Honda (CA-17), Ed Perlmutter (CO-07), Mark Takano (CA-41), Eric Swalwell (CA-15), Zoe Lofgren (CA-19), and Bill Foster (IL-11).
March 20, 2014
The Honorable Melvin L. Watt, Director
The Federal Housing Finance Agency
400 7th Street, Southwest
Washington, DC 20024
Dear Director Watt,
We are deeply concerned about Notice No. 2013-N-18, entitled “Fannie Mae and Freddie Mac Loan Purchase Limits: Request for Public Input on Implementation Issues.” On October 7, 2013, 66 Members of the House of Representatives sent a letter to Acting Director DeMarco expressing concern with his statements about reducing the loan limits in this manner (attached). Our position has not changed.
Though housing markets continue to improve, the availability of mortgage credit remains tight. As made clear in the Housing and Economic Recovery Act of 2008, “It is the sense of the Congress that the securitization of mortgages by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation plays an important role in providing liquidity to the United States housing markets.” Reducing the loan limits will only limit liquidity in certain markets.
The same Act contains specific language prohibiting the conforming loan limit from declining. It states that if the “annual adjustment is a decrease, then no adjustment shall be made.” This is a clear indication of Congressional intent to retain stability for housing markets.
We urge you not to make an arbitrary regulatory reduction of the conforming loan limits. We urge you to continue to defer to the United States Congress on whether the conforming loan limits should be reduced and allow our delicate recovery in housing to continue.
Rep. Carolyn Maloney (NY-12)